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T3's Take 3: Geopolitical Tensions Return After Turkey Takes Out Russian Jet


Today's financial recap and tomorrow's financial outlook.

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Turkey, Russia, and Oil

Geopolitical tensions were back on the rise today after Turkey shot down a Russian fighter jet near the Syrian border.

As a result, Russian President Vladimir Putin called the action a "stab in the back" and issued a warning of "serious consequences." However, he did not threaten any specific military action. 

Turkey defended its action by saying they gave repeated warnings that its airspace was being violated. Turkish President Recep Tayyip Erdogan expressed regret, but said Turkey was just defending its borders.

Consequently, European equity markets closed down across the board, with the German DAX falling 1.4%. Crude oil shook off recent weakness to rise almost 3% to $42.88, with an intraday high at $43.46 

In a flight to safety move, the yen strengthened against the US dollar, while the 10-year German bund yield fell 1.3 bps to 0.517%. 

Market Roundup

S&P 500 futures started the day off on a very negative note following the events in Turkey.

The S&P 500 index opened weak, dropping as low as 2070.29, approaching the widely-watched 200 day moving average, which sits at 2065.15.

However, equities caught a bid, and the S&P powered higher to close at 2089.14, up 0.1%.

The NASDAQ Composite managed to close up 0.01%, helped by a 1.0% rally in index leader Apple (AAPL).

But the Russell 2000 (IWM) really led the charge with a 0.7% gain. 

Commodities were also strong, with the Energy Select SPDR ETF (XLE) rising 2.1% on the pop in oil prices. Gold was also strong, gaining 0.8%. 

Airline stocks were weak after the US State Department issued a worldwide travel alert of Americans due to concerns over terrorist attacks.

Faith in the Fed

Fed fund futures now imply a 74% probability of a December rate hike, up from 72% yesterday and 66% last week.

Today's economic data seems to support the case for a rate hike.

The second estimate of third-quarter GDP was 2.1%, up from the 1.5% initial estimate last month.  

Personal consumption was revised lower, but still came in at a solid 3.0%.

Tomorrow will be an even more pivotal day in terms of data because many reports were moved up from Thanksgiving and Black Friday.

Specifically, the Fed's preferred inflation indicator, the PCE Deflator, will be reported tomorrow, and if it comes in hot, a December rate hike will likely be viewed as a sure thing.
Wednesday Preview

Tomorrow will be a very heavy day in terms of data. The PCE Deflator, Durable Goods, Jobless Claims, and New Homes Sales numbers are just a few of the big reports that will be released on Wednesday ahead of the Thanksgiving holiday.

Overseas, New Zealand will release its Trade Balance and Australia will release it Private Capital Expenditure.

Dangdang (DANG), Deere (DE), and (DATE) will report earnings.

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